Limiting Government: the Role of Gold

Government has two great powers: (1) the legal monopoly on the use of force, i.e., coercion; and, (2) the power of the purse. The legal monopoly on coercion is limited in the extreme by the 2nd Amendment to the Constitution, which gives the people the right to bear arms. The power of the purse is, in theory, limited by the “enumerated powers” in Article II Section 8 of the constitution, which legally empower the government to do those things that are permitted and that everything else is prohibited. After 1933, the Supreme Court stood this principle on its head, and now the government is believed to be empowered to do anything that is not prohibited. The Constitution provides another limitation, though: that the government may coin gold and silver, and that only gold and silver may be used to pay debts. Because almost everything that government wishes to do costs money, the structure of the Constitution requires that it tax that money (which people tend to resist), or borrow it (borrowing by government just being delayed taxation). But if the government, or in our case the banking system, can create unlimited amounts of legal tender irredeemable paper-ticket-electronic money out of nothing, then taxation is not necessary, and government can do anything it wants without consulting the people. – This lecture was prepared in October 2010.

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Meaningful Insights

“Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency. . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose.”

— John Maynard Keynes, The Economic Consequences of the Peace, 1920, page 235ff